International commercial contracts: five common mistakes and how to avoid them

The five mistakes that cause most disputes in international commercial contracts are: no clear choice of law, a dispute clause that does not lead to an enforceable decision, payment terms that ignore the statutory rules, termination and force majeure clauses copied from a common-law template, and general terms and conditions that never validly became part of the contract. Each is easy to avoid when drafting and expensive to repair afterwards.

This page looks at these mistakes from the perspective of Dutch law, which applies to most contracts concluded by businesses in the Netherlands, together with the EU rules on applicable law and jurisdiction. For the negotiation side, see our guide to contracting with Dutch parties.

Why do cross-border contracts go wrong more often?

Because three separate questions decide the outcome: which law governs the contract, which court or tribunal decides a dispute, and whether that decision can be enforced where the other party has its assets. A clause that works under one law can fail under another.

Language adds a fourth risk. Contracts are usually written in English, even when the governing law is Dutch. English terms such as consideration, best endeavours, indemnity or condition precedent have no fixed meaning in the Dutch Civil Code (Burgerlijk Wetboek, BW). A Dutch court interprets a contract by asking what the parties could reasonably expect from each other in the circumstances, not only by reading the words: the Haviltex standard of the Supreme Court (ECLI:NL:HR:1981:AG4158). In a heavily negotiated contract between professional parties, the wording carries more weight; in other cases, the negotiations and the commercial purpose matter too. If the contract exists in two languages, state which version prevails.

Mistake 1: leaving the applicable law to chance

A contract without a choice of law still has a governing law. Within the EU, the Rome I Regulation decides which law that is, and it does so only after a dispute has arisen.

Without a choice, a sale of goods is governed by the law of the seller’s country, a service contract by the law of the service provider’s country, a distribution contract by the law of the distributor’s country and a franchise by the law of the franchisee’s country. A Dutch buyer who buys from a German seller without a choice of law will therefore usually face German law. See our guide to the applicable law in international agreements.

The Vienna Sales Convention applies unless you exclude it

For international sales of goods, the UN Convention on Contracts for the International Sale of Goods (CISG, in Dutch: Weens Koopverdrag) applies automatically between parties in contracting states. Choosing Dutch law does not exclude it, because the Convention is part of Dutch law.

If you want Dutch domestic sales law, you must exclude the CISG expressly: “This agreement is governed by Dutch law, excluding the Vienna Sales Convention.” Which regime suits you is a commercial choice. Sellers often prefer domestic law, with its strict duty for the buyer to complain promptly; buyers often prefer the Convention.

Some rules apply whatever law you choose

A choice of law does not override mandatory rules on competition, sanctions and export controls, product safety, anti-money laundering or data protection. Self-employed commercial agents working in the EU keep their statutory protection, including the right to a goodwill indemnity on termination, even if the contract chooses the law of a non-EU country. Courts look at the substance of the relationship, not its label; see our overview of types of commercial agreements.

Mistake 2: a dispute clause that cannot deliver an enforceable decision

The test of a dispute clause is whether the decision it produces can be enforced against the other party’s assets. The answer differs inside and outside the EU.

Within the EU, the Brussels I recast Regulation allows parties to agree that the courts of a member state have jurisdiction; that choice is exclusive unless agreed otherwise. A judgment from one member state is enforceable in the others without a separate declaration of enforceability. Without a choice of court, a Dutch supplier delivering goods to France can be sued in France, as the place of delivery.

Outside the EU, a foreign judgment cannot be enforced in the Netherlands without a treaty or EU regulation; the case must be brought again before the Dutch court (Article 431 of the Dutch Code of Civil Procedure, Rv). The same problem exists in reverse for a Dutch judgment abroad. Our guide to jurisdiction and enforcement issues sets out the checks.

When is arbitration the better choice?

When the counterparty is outside the EU. The 1958 New York Convention obliges well over 160 states to recognise arbitration agreements and enforce arbitral awards on narrow grounds only. Dutch arbitration law is in Book 4 Rv; the Netherlands Arbitration Institute (NAI), the ICC and the LCIA are common choices.

An arbitration clause needs four elements: the institution and its rules, the seat, the number of arbitrators and the language. The seat is the most important, because it determines the supervising court. Arbitration is confidential but not automatically cheaper or faster, and there is in effect no appeal on the merits. A stepped clause (negotiation, then mediation, then arbitration) works only if each step has a deadline.

For disputes between European parties who want a state court in English, the Netherlands Commercial Court (NCC) in Amsterdam is an option. It requires an express written agreement and charges higher court fees than the ordinary Dutch courts.

Mistake 3: payment terms that ignore the statutory rules

For business-to-business contracts, Dutch law already regulates late payment. If no payment date is agreed, statutory commercial interest (wettelijke handelsrente) is due automatically from 30 days after the buyer received the invoice, or the goods or services if they arrive later (Article 6:119a(2) BW).

A longer payment term can be agreed, but no more than 60 days, unless a longer term is expressly agreed and is not grossly unfair to the creditor (Article 6:119a(5) BW). If a large company buys from a small or medium-sized business, the term may not exceed 30 days; a longer term is void (Article 6:119a(6) BW). Once the deadline passes, the creditor is also entitled to at least €40 in collection costs without a reminder (Article 6:96(4) BW). The commercial interest rate is set by the government each half-year; do not put a lower rate in the contract, because an agreed rate takes the place of the statutory one (Article 6:119a(9) BW).

Avoid vague triggers such as “payment upon completion”. State when the invoice may be sent, what it must contain, the due date, currency and account. The surrounding clauses deserve the same care.

How do you secure payment?

Under Dutch law the seller can keep ownership of delivered goods until the buyer has paid: retention of title (eigendomsvoorbehoud, Article 3:92 BW). It also works in the buyer’s bankruptcy, so the seller can reclaim the goods from the trustee. It must be agreed in advance and can only secure the price of goods and related services, not unrelated debts (Article 3:92(2) BW).

Once the goods leave the Netherlands, the law of the country where they are decides whether the retention of title is effective. Other instruments are a bank guarantee, a parent company guarantee, a letter of credit or payment in milestones. State whether a deposit is refundable on cancellation. See also our guide on the bankruptcy of your contract partner.

Mistake 4: termination and force majeure on the wrong model

Dutch law distinguishes between rescission for breach, termination by notice and force majeure. Common-law templates squeeze these into one clause that often does not work as intended.

Rescission requires default first

Any failure to perform gives the other party the right to rescind (ontbinden) the contract, unless the failure is too minor (Article 6:265(1) BW). If performance is still possible, the debtor must first be in default (verzuim) (Article 6:265(2) BW). Default normally requires a written notice of default (ingebrekestelling) with a reasonable period to perform (Article 6:82 BW).

No notice is needed if an agreed fatal deadline has passed or the debtor has said it will not perform (Article 6:83 BW). Skipping a required notice is one of the most common procedural mistakes in Dutch commercial disputes. After rescission both parties must undo what they received, which is not always what the terminating party wants.

Ending a long-term relationship

A contract for an indefinite period can generally be terminated by notice, but reasonableness and fairness may require a sufficiently long notice period or compensation, depending on the duration, investments and dependence. A distributor who built a market over ten years cannot simply be given thirty days. Set the notice period and the consequences in the contract; see termination and notice periods.

Force majeure and unforeseen circumstances

A failure is not attributable to the debtor if it is not its fault and not at its risk by law, contract or common opinion (overmacht, Article 6:75 BW). Force majeure excuses damages but does not end the contract; the other party can still rescind.

Because the statutory test turns on risk, your force majeure clause changes the outcome. Name the events (epidemics, sanctions, export bans, cyberattacks, failure of a named supplier), set a notice period in days, say whether payment obligations continue and add a long-stop termination right. Separately, the court may amend or rescind a contract for unforeseen circumstances that make unchanged performance unacceptable (Article 6:258 BW). The threshold is high.

Penalty clauses and liability caps

A penalty clause (boetebeding) is valid, but the court may reduce it if fairness clearly requires this, and that power cannot be excluded (Article 6:94 BW). By law, a penalty replaces statutory damages (Article 6:92(2) BW); if you want both, say so expressly.

Limitations of liability between businesses are generally upheld, but cannot be relied on where that would be unacceptable under reasonableness and fairness, such as in cases of intent or deliberate recklessness. A cap linked to the contract value or the insured amount holds better than a blanket exclusion.

Mistake 5: general terms that never became part of the contract

General terms carry your liability cap, retention of title, jurisdiction clause and choice of law. Two questions decide whether they apply: whose terms prevail, and were they provided in time?

Dutch law follows the “first shot” rule. If offer and acceptance refer to different general terms, the second reference has no effect unless it expressly rejects the first party’s terms (Article 6:225(3) BW). Under the CISG the outcome may differ, so the same exchange of documents can lead to different results depending on whether the Convention is excluded.

The user must also give the other party a reasonable opportunity to read the terms, in principle by handing them over before or when the contract is concluded, or electronically in a form that can be stored (Articles 6:233(b) and 6:234 BW). However, these protective rules do not apply between businesses that are not both established in the Netherlands (Article 6:247(2) BW). In international contracts, whether the terms apply then depends on the general rules of contract law and, for the jurisdiction clause, on the Brussels I recast formal requirements. Attaching the terms to the quotation is the safest route. See our guide to drafting general terms and conditions.

What else should an international contract cover?

Delivery terms, ownership, confidentiality, intellectual property and signing authority. These are not among the five classic mistakes, but they cause disputes just as often.

• Incoterms. Refer to the edition (Incoterms 2020) and name the exact place. Use FCA, CPT or CIP for containers; FOB, CFR and CIF are meant for goods loaded onto a vessel. Incoterms allocate cost and risk, not ownership. For road transport in Europe, the CMR Convention governs the carriage contract.
• Ownership. Under Dutch law ownership passes on delivery under a valid title by a person entitled to dispose of the goods (Article 3:84 BW), separately from risk. State when each passes in the sales contract.
• Confidentiality. There is no general statutory duty of confidentiality between commercial parties, so agree one, ideally with a penalty; see our non-disclosure agreement guide.
• Intellectual property. Paying for work does not transfer the rights. Copyright created by a contractor stays with the contractor unless it is assigned by deed. Our intellectual property lawyers can check the allocation.
• Personal data. The GDPR applies whatever law you choose. A processor needs a data processing agreement, and transfers outside the EEA need a legal basis.
• Authority and signature. Check the Chamber of Commerce (KVK) trade register for a Dutch counterparty’s directors. A qualified electronic signature has the same effect as a handwritten one; other electronic signatures are valid if the method is sufficiently reliable (Article 3:15a BW).

What should you check as a seller or supplier?

• Does the contract choose a law and state whether the CISG applies?
• Can a judgment or award be enforced in the country where the buyer has its assets?
• Did you refer to your general terms in your first document and attach them?
• Is retention of title agreed, and is it effective in the country of destination?
• Are your force majeure events named, with a long-stop termination right?
• Is your liability cap tied to the contract value or insured amount?

What should you check as a buyer?

• Which law applies if nothing is chosen? For a sale, usually the seller’s law.
• Is the payment term within the 60-day limit of Article 6:119a(5) BW, or 30 days if you are a large company buying from a small one?
• When do risk and ownership pass, and who insures the goods in transit?
• How long do you have to inspect goods and notify defects?
• Do you own the intellectual property in what you pay for, or only a licence?

What can we do for you with international commercial contracts?

Our contract lawyers draft and review cross-border agreements for Dutch and foreign businesses.

• We review your draft contract against the five mistakes on this page and mark every clause that needs changing.
• We draft choice-of-law, jurisdiction and arbitration clauses that fit where your counterparty’s assets are.
• We draft or update your general terms and the process to make them part of each contract.
• We draft notices of default and termination letters that meet Articles 6:82 and 6:265 BW.
• We negotiate the contract with your counterparty or its lawyers.
• We conduct proceedings before the Dutch courts, the NCC or in arbitration if a dispute arises.

Summary

• Choose the law and state whether the CISG applies; choosing Dutch law alone keeps the Convention in place.
• Choose a forum whose decision can be enforced where the other party’s assets are; outside the EU this often means arbitration.
• Payment terms between businesses are capped at 60 days, and at 30 days for a large company buying from a small one (Article 6:119a BW).
• Rescission usually requires a written notice of default first (Articles 6:82 and 6:265 BW), and courts can reduce penalties (Article 6:94 BW).
• Under Dutch law the first reference to general terms prevails unless expressly rejected (Article 6:225(3) BW).

Frequently asked questions